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Wednesday, November 1, 2017

Which Household Income Group Do You Belong To? Top Middle or Bottom?

Department of Statistics Malaysia recently has released Report of Household Income And Basic Amenities Survey 2016 in their website on 9 October 2017. Personal interviewing approach was used for a period of twelve months starting from May 2016 until April 2017 to collect data on the characteristics of Malaysian household particularly on income and basic amenities.

What is Household Income?

#YourFinanceDoctor came across some Facebook posts where people seems to be confused with the data. First and foremost, Do bear in mind that Household Income is not the same as Personal Income. Household Income refer to total incomes received (accrued) by all members of households, both in cash and in kinds which occur repeatedly within the reference period (within a year).

So remember, the figure is not just your salary alone, you have to add it all together with your spouse, parents or whoever that is staying with you. Next, the difference of median and mean. What is median and mean? Why both are important?

If you still remember the maths in high school, Median is the middle number in a sorted list of numbers. For this survey report, all the household income data collected will be sorted from smallest to largest. So, Median is the middle value that separating the higher half from the lower half.

What is Mean?

Mean is the average of all the values, which computed by dividing the total of all values by the number of values. In other words, all the household income data collected were being summed and divided by number of household.

A lot of you might be curious what does Median tell us? Well, in this case, Median gives a helpful measure of center of the data, especially if there is an extreme value which could impact the Mean.

RM3,000 RM4,000 RM5,000 RM6,000 RM200,000 (extreme)

Mean = RM218,000 / 5 = RM43,600

Median = RM5,000

For example, if there is a millionaire (extreme value) which earns RM200,000 a month, then it would greatly increases the Mean (RM43,600). However, the Median (RM5,000) would more accurately represent the income of most of the people in this example.

Which one should I use?

BOTH. For this Household Income case, Median would be more preferrable, but Mean tells you something too! Ideally, if Mean and Median are having the same figure, then the data are normally distributed or also known as the "Bell Curve". So by comparison of Median and Mean...

Conclusion...

1. Malaysia as a whole, rich people are a lot richer!

As shown in the first figure, Malaysia Household Income as a whole has a Median of RM5,228 which is lower than the Mean of RM6,958. In other words, those higher than the middle value, Median (RM5,228), is a lot richer.

2. T20 of Malaysia, rich people are a lot more richer!

For the T20, Median of RM13,148 is lower than the Mean of RM16,088. So there must be extreme value in the T20 from the super duper rich!

3. M40 of Malaysia, near to normally distributed

For the M40, Median of RM6,275 is slightly lower than the Mean of RM6,502.

4. B40 of Malaysia, poor people are a lot poorer!

Lastly, for the B40, Median of RM3,000 is higher than the Mean of RM2,848. In other words, there are extreme values from the B40, which is way below of RM2,848.

By now, you should roughly know which household income group you belong to. And within the group itself, is your household income higher or lower than the Mean and Median? Regardless which group you are in, as a Malaysian, let's do our part by earning more money to help Malaysia achieve high income nation status by 2020!